One of my clients has earned a capital gain of amount X in the current financial year from selling residential property. He invested this amount in the shares of a Private Limited Company through Private Placement during the current financial year itself. He has incurred a loss on such shares to the tune of Rs. Y. Is it possible to set off his capital gain from property against Short Term Capital Loss on sell of shares because the value of shares has reduced by 85 % from the price he paid for the acquisition of the same. Private Placement was done at a fair market value decided by a Merchant Banker during the private placement. The questions are 1. Is set off available ? 2. Is the price of transfer is the price of consideration or price as decided by Merchant Banker is to be taken to compute the profit/loss on sell/transfer ?
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SHORT TERM CAPITAL LOSS ON SELL OF SHARES OF PRIVATE COMPANY AND SET OFF AGAINST ANY LTCG
Replies (2)
Quick Summary
It's not set off in the same way.
Short term capital loss on shares can be set off from long term capital gain arising from sale of residential property. But the shares have to be transferred only then it will qualify as realised short term capital loss. Notional loss in the price of shares without actual transfer shall not be treated as short term capital loss for tax purposes.
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